ATP off in active dealings; Chesapeake bonds, converts mimic stock slide; Patriot weaker

By Paul Deckelman

New York, June 25 - Energy names were seen taking it on the chin in the distressed-debt market Monday, participants said.

ATP Oil & Gas Corp.'s bonds were quoted lower, giving up the gains of several points that the offshore energy operator notched last week on news that it completed a $35 million convertibles deal.

Chesapeake Energy Corp.'s junk bonds and convertible debt were lower, in line with its stock, on the latest bad news to surface about the embattled natural gas producer. Reports said it allegedly conspired with a rival bidder to keep prices low during land auctions that the two companies participated in some years ago.

Patriot Coal Corp.'s convertibles also traded lower Monday in light trading volume.

Latin America's PDVSA was fairly active, but the Venezuelan state oil monopoly's bonds weakened.

Away from the energy realm, Navistar International Corp.'s convertible debt weakened in heavier-than-average volume as shares slipped.

Troubled Finnish phonemaker Nokia Corp. lost several points on the session.

ATP off on day

A trader said that ATP Oil & Gas' 11 7/8% second-lien senior secured notes due 2015 were down in sizable trading of $15 million to $16 million.

He saw the Houston-based offshore energy exploration and production company's bonds down about 1 point at the 45 bid, 46 offered level, on what he called "decent volume."

A second trader saw the bonds at 46 bid, which he said were a little lower on the day. "There was some trading, but it was not superactive."

He said the bonds earlier hit a low point of 451/2.

Yet another trader pegged the bonds at 45¾ bid versus going-home levels of 46¾ bid, 47 offered Friday.

And earlier last week, ATP bonds moved as high as a 49-50 context, up by several points after news that the company raised $35 million through the sale of 8% convertible notes due 2013 and a warrant to buy 3.9 million shares of the company's stock in a private sale involving one institutional client.

But observers said that even though this was good news for the company, investor worries about how the slowing global economy is weighing on shares of energy names in general.

Chesapeake churns on bad news

Another energy name, Chesapeake Energy, moved lower in line with a fall in the Oklahoma City-based natural gas producer's shares, on published reports that Chesapeake and a rival energy concern, EnCana Corp., allegedly discussed bidding strategies for potential oil and gas properties being auctioned off several years ago so the two companies would not bid against each other and send those prices up.

Michigan officials said they are investigating the matter.

Chesapeake's New York Stock Exchange shares dropped by $1.58, or 8.49%, to end at $17.03, on slightly less than normal value.

A bond trader said the company's 9½% notes due 2015 was one of its more active issues. He said the notes retreated to about 1061/2, down from previous levels around 107½ bid, 108 offered.

The company's 6 5/8% notes due 2020 were down a point at 99¼ bid, while its 6.775% notes due 2019 eased to 98 7/8 bid.

Chesapeake's 2.5% convertible senior notes due 2037 traded going out Monday in the 84 bid, 86 offered area, hurt by the fall in the stock price. The company sold $500 million of those notes in 2007 at 97.625.

Patriot Coal weaker

Patriot Coal's convertibles moved lower Monday in lighter trading volume.

"Not real active," one trader said, seeing the 3.25% convertibles due May 31, 2013 at 22 bid, 23 offered from 28 bid, 33 offered Friday.

Another bond source saw the notes at 20 bid, 23 offered, while the shares dropped 8 cents, or 6.35%, to close at $1.18.

Patriot Coal sold the convertibles in 2008 at par.

The St. Louis-based coal producer's notes have been weakening steadily since its last earnings report listed a customer default.

The company has been trying to restructure and faces an expiration of a lender commitment letter July 6.

PDVSA gets punished

Also among the energy credits, a trader said that Petroleos de Venezuela's bonds were actively trading at lower levels.

He quoted the Venezuelan state oil monopoly's 8½% notes due 2017 at 79 bid, 80 offered, which he said was down 1 point on the day, on pretty good volume of about $17 million to $18 million.

PDVSA's 9% notes due 2021 also were down 1 to 1½ points, he said, at 70 bid, 71 offered.

Nokia knocked around again

Away from energy, a trader said that Finnish cellphone handset maker Nokia's 5 3/8% notes due 2019 were "off a couple more points today," quoting the issue at around 78 bid.

That contrasted with previous levels around 80 bid and was well down from recent levels in the 90s before the money-losing company's recent announcement of plans to cut as many as 10,000 jobs and close several factories. That's in line with sagging sales as it faces stiff competition from the likes of Apple Corp.

Those job cuts, meanwhile, come on top of another 10,000 headcount reduction that the company enacted last year in hopes of bringing costs down in a slow-growth environment.

Navistar a busy name

Back in the convertibles market, Navistar International's convertible debt was "fairly active today," a trader said.

Several sources saw Navistar's 3% convertibles due 2014 trading lower in heavier volume as shares fell $1.63, or 6.03%, to close at $25.39 a share.

"Using theoretical hedge of 35, bonds traded at 91.605 versus [a share price of] $25.35, which is moving down in line neutral," a trader said.

Another trader saw the convertibles at 91, 91.5 versus a share price of $26.00, about a 1/2-point weaker on the day.

The commercial and military bus and truck manufacturer is based in Lisle, Ill.

Cristal Cody contributed to this report

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